China Rongsheng Flags Full-Year Loss as Shipping Slump Takes Toll
China Rongsheng Heavy Industries Group, the country's largest private shipbuilder, said on Wednesday it expects to report a substantial full-year loss just months after it appealed to the government for financial help.
The struggling shipbuilder said this year an unspecified number of workers had been made redundant and it reported a net loss of 1.3 billion yuan ($213 million) for the first half of the year amid a prolonged industry slump.
"The company believes that the net loss is primarily attributable to the decrease in revenue as a result of the company's conservative sales strategy under the current trough stage of the shipbuilding market," China Rongsheng said in a statement to the Hong Kong stock exchange.
Analysts have said the company could be the biggest casualty of a local shipbuilding industry suffering from overcapacity and shrinking orders amid a global shipping downturn.
Workers at Rongsheng's Nantong shipyard in eastern China told Reuters on Wednesday that morale was low, with some employees complaining about a shortage of work.
"If the situation goes on as it is, I'm going to have to look elsewhere for work," said a painter employed at the plant, adding there had been no jobs for him to do in three weeks. He declined to be named for fear of losing his job.
Greek ship owner Dryships Inc has already questioned whether some of the ships on order at China Rongsheng will be delivered, which could hit its revenue and profitability next year. Dryships has four dry bulk carriers on order at the company's shipbuilding subsidiary, Jiangsu Rongsheng Heavy Industries, that are due for delivery in 2014.
"The deliveries of these vessels are severely delayed," said Ziad Nakhleh, Dryships chief financial officer, during a third-quarter results presentation last month.
China Rongsheng, which sought financial help from the government in July, has said it won only two shipbuilding orders worth $55.6 million last year when its target was $1.8 billion worth of contracts.
It told Reuters on Tuesday it had received firm orders for two large capesize dry bulk ships in the first half of 2013.
A shipbuilding source said: "The shipyard has had no confirmed orders since June 30 because payment terms and contract prices were still unfavorable. But China Rongsheng has signed some letters of intent which have yet to be transformed into confirmed orders."
A company spokesman told Reuters late on Wednesday that the shipyard had no confirmed new orders so far in the second half of the year. He declined to elaborate.
The spokesman said the company had delivered 7 vessels, with a total of 1.5 million dead weight tonnes (DWT), in the first half of 2013, and had delivered at least two 380,000-DWT class very large ore carriers in the second half of the year.
Rongsheng's profit warning was made after the close of trading in Hong Kong.
Its shares had fallen 1.7 percent in trading on Wednesday, lagging a 0.8 percent loss in the benchmark Hang Seng Index . They have fallen 7.3 percent so far this year.
By Yimou Lee (C) Reuters 2013.